Intrinsic value of B. Riley Financial, Inc. - RILY

Previous Close

$18.87

  Intrinsic Value

$6.24

stock screener

  Rating & Target

str. sell

-67%

Previous close

$18.87

 
Intrinsic value

$6.24

 
Up/down potential

-67%

 
Rating

str. sell

We calculate the intrinsic value of RILY stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  431
  441
  453
  465
  480
  495
  512
  530
  550
  571
  594
  618
  643
  670
  699
  730
  763
  797
  833
  871
  912
  954
  999
  1,047
  1,096
  1,149
  1,204
  1,262
  1,323
  1,388
Variable operating expenses, $m
  313
  320
  329
  338
  348
  359
  371
  384
  399
  414
  429
  446
  465
  484
  505
  527
  551
  575
  602
  629
  658
  689
  722
  756
  792
  830
  870
  912
  956
  1,002
Fixed operating expenses, $m
  49
  50
  51
  52
  54
  55
  56
  57
  58
  60
  61
  62
  64
  65
  67
  68
  69
  71
  73
  74
  76
  77
  79
  81
  83
  85
  86
  88
  90
  92
Total operating expenses, $m
  362
  370
  380
  390
  402
  414
  427
  441
  457
  474
  490
  508
  529
  549
  572
  595
  620
  646
  675
  703
  734
  766
  801
  837
  875
  915
  956
  1,000
  1,046
  1,094
Operating income, $m
  69
  71
  73
  75
  78
  81
  85
  89
  93
  97
  104
  109
  115
  121
  128
  135
  142
  150
  159
  168
  177
  188
  198
  210
  222
  235
  248
  262
  277
  293
EBITDA, $m
  78
  80
  82
  85
  88
  91
  95
  99
  104
  109
  114
  120
  126
  133
  140
  147
  156
  164
  173
  183
  193
  204
  216
  228
  241
  254
  269
  284
  300
  317
Interest expense (income), $m
  0
  80
  85
  90
  97
  104
  111
  120
  129
  140
  151
  162
  175
  188
  203
  218
  234
  251
  269
  288
  308
  330
  352
  376
  401
  427
  455
  484
  515
  548
  582
Earnings before tax, $m
  -11
  -14
  -17
  -21
  -26
  -30
  -35
  -41
  -47
  -53
  -58
  -66
  -73
  -82
  -90
  -99
  -109
  -119
  -129
  -141
  -152
  -165
  -178
  -191
  -206
  -221
  -236
  -253
  -270
  -288
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -11
  -14
  -17
  -21
  -26
  -30
  -35
  -41
  -47
  -53
  -58
  -66
  -73
  -82
  -90
  -99
  -109
  -119
  -129
  -141
  -152
  -165
  -178
  -191
  -206
  -221
  -236
  -253
  -270
  -288

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,944
  1,988
  2,039
  2,097
  2,160
  2,230
  2,306
  2,388
  2,477
  2,572
  2,673
  2,782
  2,897
  3,020
  3,151
  3,289
  3,435
  3,589
  3,753
  3,925
  4,107
  4,299
  4,501
  4,714
  4,939
  5,175
  5,424
  5,685
  5,961
  6,250
Adjusted assets (=assets-cash), $m
  1,944
  1,988
  2,039
  2,097
  2,160
  2,230
  2,306
  2,388
  2,477
  2,572
  2,673
  2,782
  2,897
  3,020
  3,151
  3,289
  3,435
  3,589
  3,753
  3,925
  4,107
  4,299
  4,501
  4,714
  4,939
  5,175
  5,424
  5,685
  5,961
  6,250
Revenue / Adjusted assets
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
  0.222
Average production assets, $m
  134
  137
  141
  145
  149
  154
  159
  165
  171
  178
  185
  192
  200
  209
  218
  227
  237
  248
  259
  271
  284
  297
  311
  325
  341
  357
  374
  393
  412
  432
Working capital, $m
  -58
  -59
  -61
  -62
  -64
  -66
  -69
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -94
  -98
  -102
  -107
  -112
  -117
  -122
  -128
  -134
  -140
  -147
  -154
  -161
  -169
  -177
  -186
Total debt, $m
  609
  649
  694
  745
  802
  864
  932
  1,005
  1,084
  1,168
  1,259
  1,355
  1,458
  1,567
  1,683
  1,806
  1,936
  2,074
  2,219
  2,373
  2,534
  2,705
  2,885
  3,075
  3,275
  3,485
  3,706
  3,939
  4,184
  4,442
Total liabilities, $m
  1,730
  1,770
  1,815
  1,866
  1,923
  1,985
  2,052
  2,125
  2,204
  2,289
  2,379
  2,476
  2,579
  2,688
  2,804
  2,927
  3,057
  3,194
  3,340
  3,493
  3,655
  3,826
  4,006
  4,196
  4,395
  4,606
  4,827
  5,060
  5,305
  5,563
Total equity, $m
  214
  219
  224
  231
  238
  245
  254
  263
  272
  283
  294
  306
  319
  332
  347
  362
  378
  395
  413
  432
  452
  473
  495
  519
  543
  569
  597
  625
  656
  688
Total liabilities and equity, $m
  1,944
  1,989
  2,039
  2,097
  2,161
  2,230
  2,306
  2,388
  2,476
  2,572
  2,673
  2,782
  2,898
  3,020
  3,151
  3,289
  3,435
  3,589
  3,753
  3,925
  4,107
  4,299
  4,501
  4,715
  4,938
  5,175
  5,424
  5,685
  5,961
  6,251
Debt-to-equity ratio
  2.850
  2.970
  3.090
  3.230
  3.370
  3.520
  3.670
  3.820
  3.980
  4.130
  4.280
  4.430
  4.570
  4.720
  4.860
  4.990
  5.120
  5.250
  5.380
  5.500
  5.610
  5.720
  5.830
  5.930
  6.030
  6.120
  6.210
  6.300
  6.380
  6.460
Adjusted equity ratio
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -11
  -14
  -17
  -21
  -26
  -30
  -35
  -41
  -47
  -53
  -58
  -66
  -73
  -82
  -90
  -99
  -109
  -119
  -129
  -141
  -152
  -165
  -178
  -191
  -206
  -221
  -236
  -253
  -270
  -288
Depreciation, amort., depletion, $m
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Funds from operations, $m
  -2
  -5
  -8
  -12
  -16
  -20
  -25
  -30
  -36
  -42
  -48
  -55
  -62
  -70
  -78
  -87
  -96
  -105
  -115
  -126
  -137
  -148
  -160
  -173
  -187
  -201
  -216
  -231
  -247
  -264
Change in working capital, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Cash from operations, $m
  -1
  -3
  -6
  -10
  -14
  -18
  -23
  -28
  -33
  -39
  -45
  -52
  -59
  -66
  -74
  -82
  -91
  -100
  -110
  -120
  -131
  -142
  -154
  -167
  -180
  -194
  -208
  -223
  -239
  -256
Maintenance CAPEX, $m
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
New CAPEX, $m
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -10
  -10
  -12
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -19
  -19
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
Free cash flow, $m
  -11
  -14
  -17
  -22
  -26
  -31
  -36
  -42
  -48
  -55
  -62
  -70
  -77
  -86
  -95
  -104
  -114
  -124
  -135
  -147
  -159
  -171
  -185
  -199
  -214
  -229
  -245
  -262
  -280
  -299
Issuance/(repayment) of debt, $m
  31
  40
  45
  51
  57
  62
  68
  73
  79
  85
  91
  97
  103
  109
  116
  123
  130
  138
  145
  153
  162
  171
  180
  190
  200
  210
  221
  233
  245
  258
Issuance/(repurchase) of shares, $m
  15
  19
  23
  27
  32
  38
  44
  50
  57
  64
  70
  78
  86
  95
  104
  114
  125
  136
  147
  160
  172
  186
  200
  215
  230
  247
  264
  282
  300
  320
Cash from financing (excl. dividends), $m  
  46
  59
  68
  78
  89
  100
  112
  123
  136
  149
  161
  175
  189
  204
  220
  237
  255
  274
  292
  313
  334
  357
  380
  405
  430
  457
  485
  515
  545
  578
Total cash flow (excl. dividends), $m
  35
  45
  51
  57
  63
  69
  75
  81
  87
  93
  98
  105
  111
  118
  126
  133
  141
  149
  158
  166
  175
  185
  195
  206
  216
  228
  240
  252
  266
  279
Retained Cash Flow (-), $m
  -15
  -19
  -23
  -27
  -32
  -38
  -44
  -50
  -57
  -64
  -70
  -78
  -86
  -95
  -104
  -114
  -125
  -136
  -147
  -160
  -172
  -186
  -200
  -215
  -230
  -247
  -264
  -282
  -300
  -320
Prev. year cash balance distribution, $m
  48
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  68
  26
  28
  29
  30
  31
  31
  31
  30
  30
  28
  27
  25
  23
  21
  19
  16
  13
  10
  7
  3
  -1
  -5
  -9
  -14
  -19
  -24
  -29
  -35
  -41
Discount rate, %
  9.90
  10.40
  10.91
  11.46
  12.03
  12.64
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.83
  25.02
  26.27
  27.58
  28.96
  30.41
  31.93
  33.52
  35.20
  36.96
  38.81
  40.75
PV of cash for distribution, $m
  62
  21
  21
  19
  17
  15
  13
  11
  9
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  96.4
  92.3
  87.6
  82.4
  76.8
  71.0
  65.1
  59.1
  53.2
  47.5
  42.2
  37.1
  32.4
  28.1
  24.2
  20.7
  17.6
  14.9
  12.5
  10.4
  8.6
  7.1
  5.9
  4.8
  3.9
  3.2
  2.6
  2.1
  1.7
  1.3

B. Riley Financial, Inc. is an independent investment bank. The Company's segments include capital markets, auction and liquidation, valuation and appraisal, and Principal Investments-United Online. The capital markets segment provides an array of investment banking, corporate finance, research, wealth management, sales and trading services to corporate, institutional and high net worth clients. The auction and liquidation segment utilizes a scalable network of independent contractors and industry-specific advisors to tailor its services to the needs of a multitude of clients, logistical challenges and distressed circumstances. The valuation and appraisal segment provides valuation and appraisal services to financial institutions, lenders, private equity firms and other providers of capital. The principal investments-United Online segment consists of businesses, which has been acquired primarily for attractive investment return characteristics.

FINANCIAL RATIOS  of  B. Riley Financial, Inc. (RILY)

Valuation Ratios
P/E Ratio 16.4
Price to Sales 1.9
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 4.5
Price to Free Cash Flow 4.6
Growth Rates
Sales Growth Rate 68.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 112
Current Ratio 0.2
LT Debt to Equity 18.8%
Total Debt to Equity 19.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 11.1%
Ret/ On Assets - 3 Yr. Avg. 5.3%
Return On Total Capital 15.3%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 17.1%
Return On Equity - 3 Yr. Avg. 5.3%
Asset Turnover 1
Profitability Ratios
Gross Margin 71.1%
Gross Margin - 3 Yr. Avg. 64.6%
EBITDA Margin 26.8%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 25.3%
Oper. Margin - 3 Yr. Avg. 11.7%
Pre-Tax Margin 24.7%
Pre-Tax Margin - 3 Yr. Avg. 10.5%
Net Profit Margin 11.6%
Net Profit Margin - 3 Yr. Avg. 4.8%
Effective Tax Rate 29.8%
Eff/ Tax Rate - 3 Yr. Avg. 32.2%
Payout Ratio 22.7%

RILY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RILY stock intrinsic value calculation we used $423 million for the last fiscal year's total revenue generated by B. Riley Financial, Inc.. The default revenue input number comes from 0001 income statement of B. Riley Financial, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our RILY stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.9%, whose default value for RILY is calculated based on our internal credit rating of B. Riley Financial, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of B. Riley Financial, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of RILY stock the variable cost ratio is equal to 72.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $48 million in the base year in the intrinsic value calculation for RILY stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 13.9% for B. Riley Financial, Inc..

Corporate tax rate of 27% is the nominal tax rate for B. Riley Financial, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the RILY stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for RILY are equal to 31.1%.

Life of production assets of 18 years is the average useful life of capital assets used in B. Riley Financial, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for RILY is equal to -13.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $258.058 million for B. Riley Financial, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 26.646 million for B. Riley Financial, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of B. Riley Financial, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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